These commodity stocks all yield more than 3% right now.
There’s a lot of discussion these days about how the specter of inflation could create both challenges and opportunities for investors. The challenges are obvious, as rising prices on input costs could eat into profit margins at certain corporations or erode discretionary spending dollars as consumers are forced to pay more for necessities. There are also opportunities out there, primarily in commodity stocks that traffic in the raw materials that are the building blocks of much economic activity. After all, if you’re the company taking materials out of the ground, then rising prices on those materials is fundamentally good for your bottom line. The following seven stocks all have dominant commodity businesses, as well as reliable dividends that add up to more than 3% annually at current prices.
BHP Group (ticker: BHP)
BHP is a diversified materials conglomerate based in Australia that touches many parts of global markets. It manages coal and petroleum operations to extract energy commodities, mines copper and iron ore, and extracts potassium salts known as potash that go into fertilizers and other agricultural chemicals in high demand from farmers. As a $200 billion business with its fingers in many pies, BHP offers stability as well as scale thanks to its diversified operations. Though its dividends aren’t as frequent as U.S. stocks that pay a fixed amount each quarter, the varying payouts that come twice a year are quite generous indeed at roughly twice the normal rate of the typical stock in the S&P 500. If you don’t mind the lack of consistency in dividends, BHP is a commodity stock worth a look for its income potential.
Current yield: 3.95%
LyondellBasell Industries N.V. (LYB)
Though it has headquarters in Texas, chemical company LyondellBasell is a globe-trotting firm that has operations in the U.S., Europe and Asia. Just as LYB is geographically diverse, it also has diversity in the kinds of chemicals it produces, including polyethylene and polypropylene plastics used in the packaging of household goods, advanced polymers and “agrotextiles” used in farming and landscaping applications, and various industrial chemicals and acids used by manufacturers and food service companies. On top of that, LYB is one of the largest refineries in the U.S. with processing capacity of approximately 268,000 barrels per day. For investors looking at a company that is involved with the building blocks of the global economy, the products and services provided by LyondellBasell are a great example of what to look for. With gains of 23% so far in 2021 on top of its income potential, LYB is clearly a commodity stock to watch.
Current yield: 3.82%
Newmont Corp. (NEM)
Newmont is a miner engaged primarily in the production and exploration of gold. It also produces copper, silver, zinc and lead as a result of its substantial $55 billion operations. Believe it or not, a lot of these minerals are actually the byproduct of gold mining and not necessarily something NEM has sought out. With more than 94 million ounces of proven reserves, the company is a great example of why investors like commodity stocks: They deal in tangible goods with real value. Even if the price of gold goes up or down, the fact NEM has those other minerals in the group means this company is always going to be worth something — and have plenty of metal it can sell to support its dividends.
Current yield: 3.24%
Rio Tinto Group (RIO)
Megaminer Rio Tinto Group operates facilities including refineries, smelters, mills and other materials-related processes as well as the mines themselves. As for the metals and materials RIO extracts, the $150 billion company has proven reserves that include aluminum, copper, diamonds, gold, iron ore and uranium, to name a few. Founded in 1873 and headquartered in London, RIO is one of the preeminent names in metals and has the scale and expertise to succeed in the current environment. While dividends are not as regular — paid twice a year and at varying amounts similar to other international stocks on this list — the last cycle of payouts is good for a very impressive yield at current prices.
Current yield: 5%
Schweitzer-Mauduit International (SWM)
Schweitzer-Mauduit may sound like the name of a hard-boiled spy in an action movie, but it’s actually the name of a rather boring paper company. SWM operates in two segments, engineered papers and a division called “advanced materials and structures,” but even this latter business line is pretty snooze-worthy given its focus on things like netting and films for applications in construction, medical treatments and other applications. While none of this is quite as exciting as high-octane software application out of Silicon Valley, the good news is that there simply aren’t that many paper companies anymore — and any manufacturers or end users that want this commodity have to go to SWM to get it. That adds up to reliable sales and a stable 44-cent quarterly dividend as a result.
Current yield: 3.91%
Southern Copper Corp. (SCCO)
As you might have guessed by the name, Southern Copper engages in mining and refining of copper, mostly in the Southern Hemisphere. In addition, SCCO also operates mines that produce zinc, lead, silver, gold and other materials, but copper is in the firm’s name for a reason as it is the driving force of its operations. Of all the metals to be involved in, copper is perhaps the most diverse given its high thermal and electrical conductivity. As copper is used in everything from electrical wires and pipe fittings to jewelry and cookware, the company has a diverse array of customers and end users to serve even though it might be heavy into this one metal. That built-in diversification of copper buyers creates less risk and smooths out volatility, giving this $60 billion miner the certainty to support reliable dividends.
Current yield: 3.56%
SunCoke Energy (SXC)
Highlighted recently as one of the best small-cap dividend stocks to consider in 2021, the narrative for SunCoke remains the same in the middle of this year as it did in the beginning. SunCoke is a coal company, but it’s focused primarily on “coking” coal that is used to make iron ore into steel. Obviously if you believe that materials demand will be strong in the near term, then SXC is also likely to see strong demand from steelmakers. SXC has paid a reliable 6-cent dividend each quarter since 2019, including throughout the pandemic-related disruptions, offering an above-average yield at current prices even after an impressive run of 58% or so year to date.
Current yield: 3.27%
Seven commodity stocks to buy for great dividends:
— BHP Group (BHP)
— LyondellBasell Industries N.V. (LYB)
— Newmont Corp. (NEM)
— Rio Tinto Group (RIO)
— Schweitzer-Mauduit International (SWM)
— Southern Copper Corp. (SCCO)
— SunCoke Energy (SXC)
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Update 05/13/21: This article was published on a previous date and has been updated with new information.